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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The most desirable alternative given up as the result of a decision






2. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






3. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






4. Entry of new firms shifts the cost curves for all firms downward






5. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






6. ATC = TC/Q = AFC + AVC






7. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






8. Exists if a producer can produce a good at lower opportunity cost than all other producers






9. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






10. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






11. The sum of consumer surplus and producer surplus






12. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






13. MUx / Px = MUy/Py or MUx/MUy = Px/Py






14. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






15. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






16. The additional benefit received from the consumption of the next unit of a good or service






17. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






18. The mechanism for combining production resources - with existing technology - into finished goods and services






19. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






20. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






21. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






22. A firm that has market power in the factor market (a wage-setter)






23. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






24. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






25. Demand for a resource like labor is derived from the demand for the goods produced by the resource






26. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






27. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






28. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






29. TR = P * Qd






30. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






31. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






32. Ed = 0 - no response to price change






33. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






34. Ei > 1






35. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






36. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






37. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






38. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






39. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






40. The practice of selling essentially the same good to different groups of consumers at different prices






41. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






42. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






43. AVC = TVC/Q






44. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






45. Exists if a producer can produce more of a good than all other producers






46. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






47. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






48. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






49. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






50. Entry (or exit) of firms does not shift the cost curves of firms in the industry